NAIROBI, Kenya July 28 – The five top companies at the Nairobi Securities Exchange (NSE) account for 77.23 per cent of its market capitalization, revealing continued waning investor confidence at the bourse.
Even so, this is a drop from 78.83 per cent which the top five firms accounted for in the first quarter of 2022, meaning their dominance has shed albeit slightly.
According to the CMA Capital Soundness Report Q2 2022, Safaricom, East Africa Breweries Limited (EABL), KCB Group, Equity Bank and Co-op Bank now control Sh1.49 trillion of investors’ wealth out of NSE’s Sh1.93 trillion capitalization.
This has made it difficult for investors to measure the true performance of the bourse due to the companies’ outsized influence on key market indicators.
“The market concentration risk that the Kenyan capital markets continue to face remains a key policy discussion both amongst regulators and the legislature of the country,” said the report.
To minimize this risk, the CMA called for more strategic initiatives aimed at growing other sectors of the economy are needed to increase the range of sectors represented by listed firms at the bourse.
The Authority, in the review of its Public Offers and Listing Regulations also sought to provide favorable listing requirements to attract more companies to list.
Further, the NSE has been calling for a speed-up in the listing of state companies to support the bourse to enhance opportunities for investors.
Overall, the Nairobi bourse continued to witness much slower activities during the quarter under review with turnover levels still suffering from the effects of negative economic shock even as the country approaches the August 2022 elections.
Even so, equity turnover ratio in the reporting periods averaged 0.42 per cent an improvement from last quarter’s ratio of 0.36 per cent.
“Improving the markets turnover levels, in the long run, requires a growth in more quality listings at the bourse, roll out of more liquidity enhancement tools, as well as increased quality of investors,” said CMA.
The Authority has been working on the promotion of market development through targeted investor education and market deepening initiatives spanning corporates, public corporations, private companies and educational institutions.
“In addition, the Authority has partnered with the NSE in a bid to ensure that there are new products in the market such as day trading that will increase the flexibility and transparency with which investors in the capital markets are able to trade and transact,” the report said.
Liquidity also improved during the quarter to 1.68 per cent compared to 1.18 per cent, while market volatility rose
slightly, mainly due to the unpredictability of the global economy
